Silver v. Silver

200 Conn.App. 505

238 A.3d 823

Amy SILVER

v.Trevor SILVER

AC 42777

Appellate Court of Connecticut.

Argued May 18, 2020

Officially released September 29, 2020

Charles D. Ray, with whom, on the brief, was Angela M. Healey, for the appellant (defendant).

Yakov Pyetranker, for the appellee (plaintiff).

DiPentima, C. J., and Moll and Harper, Js.^*

MOLL, J.

In this dissolution matter, the defendant, Trevor Silver, appeals from the judgment of the trial court granting a postdissolution motion filed by the plaintiff, Amy Silver, seeking to "clarify and effectuate" the judgment of dissolution rendered by the court. On appeal, the defendant claims that the court improperly modified the dissolution judgment in granting the plaintiff's motion. We affirm the judgment of the trial court.

The following facts and procedural history are relevant to our resolution of this appeal. The parties were married in 2008. In 2012, the parties founded Exusia, Inc. (Exusia), an information technology consulting business.¹ The plaintiff was employed as Exusia's chief financial officer² and owned 10 percent of Exusia's corporate stock. The defendant was employed as Exusia's chief executive officer and owned the remaining 90 percent of Exusia's corporate stock.

On October 26, 2016, the plaintiff commenced the present action seeking a dissolution of the parties’ marriage on the ground that the marriage had broken down irretrievably. The matter was tried to the court, Diana, J. , over the course of several days in October, 2018. Both parties submitted proposed orders and posttrial briefs.

In the plaintiff's proposed orders, with respect to Exusia, the plaintiff requested in relevant part that the court (1) find that, notwithstanding the plaintiff's ownership of 10 percent of Exusia's corporate stock, the plaintiff possessed a 50 percent equitable interest in Exusia, and (2) order the defendant to buy out the plaintiff's 50 percent interest in Exusia. The plaintiff summarized her proposed terms for the division of Exusia as follows: "As and for a lump sum property settlement, the defendant shall buy out the plaintiff's 50 [percent] interest in Exusia.... In essence, the defendant shall cause Exusia to redeem the plaintiff's 10 [percent] interest, and he shall buy out the plaintiff's 40 [percent] interest, with both payments made in installments over the next ten (10) years.... The 10 [percent] redemption payout shall be taxable to the defendant as a constructive distribution. See 26 C.F.R. § 1.1041-2, Treas. Reg. § 1-1041-2.³ ... With respect to the 40 [percent] buyout, the court shall order: that the buyout is a transfer of property to a former spouse incident to the divorce, such that no gain or loss shall be recognized; see I.R.C. § 1041 (a) (2) ;⁴ that the property shall be treated as acquired by the transferee by gift, and that the basis of the transferee in the property shall be the adjusted basis of the transferor; see I.R.C. § 1041 (b) ;⁵ and that the transfer is related to the cessation of the marriage. See I.R.C. § 1041 (c) (2).⁶ ... The court shall order that the plaintiff's buyout entitlement shall be nondischargeable in bankruptcy.... The court shall reserve continuing jurisdiction over the buyout provision above to effectuate and implement the plaintiff's receipt of her 50 [percent] interest." (Footnotes added.) The plaintiff attached to her proposed orders a document setting forth specific terms for her proposed orders regarding Exusia (schedule).

On December 4, 2018, the trial court issued a memorandum of decision rendering a judgment of dissolution. With regard to Exusia, the court found that the parties each owned a 50 percent equitable interest therein and that the fair market value of 100 percent of the equity thereof was $20,000,000. The court then entered the following relevant orders regarding Exusia: "As and for a lump sum property settlement, the defendant shall buy out the plaintiff's 50 percent interest in Exusia.

"The buyout payout structure is set forth as follows: The defendant shall cause Exusia to redeem the plaintiff's 10 percent interest and he shall buy out the plaintiff's 40 percent interest, with both interests paid out as one payment made in installments over the next ten (10) years. The 10 percent redemption payout shall be taxable to the defendant as a constructive distribution. See 26 C.F.R. § 1.1041-2, Treas. Reg. § 1.1041-2.

"With respect to the 40 percent buyout, the court orders: that the buyout is a transfer of property to a former spouse incident to the divorce, such that no gain or loss shall be recognized; see I.R.C. § 1041 (a) (2) ; that the property shall be treated as acquired by the transferee by gift, and that the basis of the transferee in the property shall be the adjusted basis of the transferor; see I.R.C. § 1041 (b) ; and that the transfer is related to the cessation of the marriage. See I.R.C. § 1041 (c) (2).

"The court orders that the plaintiff's buyout entitlement shall be nondischargeable in bankruptcy. The court hereby reserves continuing jurisdiction over the buyout provisions above to effectuate and implement the plaintiff's receipt of her 50 percent interest.

"The specific buyout provisions ... [are as follows]: (i) The defendant shall cause Exusia to redeem, pursuant to a redemption agreement, the plaintiff's 10 percent interest in [Exusia] for the sum of $2,000,000, which shall be paid in quarterly installments of $50,000. The foregoing 10 percent payment shall commence effective March 15, 2019, and continue on the fifteenth of each and every quarter thereafter for a term of ten years.

"(ii) The defendant shall cause Exusia to enter into a deferred compensation agreement ... with the plaintiff, in the aggregate amount of $8,000,000 minus $957,000,⁷ the plaintiff's 40 percent interest in [Exusia].

The first $43,000 shall be payable to the plaintiff immediately upon execution of [certain] corporate documents, as defined [elsewhere in the dissolution judgment]. The remaining $7,000,000 shall be paid to the plaintiff in equal quarterly installments of $175,000, due on the 15th day of each quarter, for a term of [ten] years ( [forty] quarterly payments in total). The first payment is due on March 15, 2019, and shall be paid quarterly as set forth above ( [forty] payments of $225,000 for [ten] years). The defendant shall receive a credit in the amount of $675,000 in consideration for the asset/liability division. The final three payments due the plaintiff shall not be paid by the defendant as satisfaction of this credit." (Footnote added.) The foregoing orders substantively paralleled the terms in the plaintiff's proposed orders and in the schedule attached thereto.⁸ Neither party appealed from the dissolution judgment.

On January 15, 2019, the plaintiff filed a postdissolution motion to "clarify and effectuate" the judgment of dissolution (January 15, 2019 motion). She requested that the court issue a "clarification" explaining whether it "intend[ed] that [she] receive her 40 [percent] share of Exusia tax free in the buyout, irrespective of the specific method of corporate documents implemented to further this intent .... That is, did the court intend that [she] receive her 40 [percent] share of Exusia tax free in the buyout, regardless of references in the [dissolution] judgment to specific corporate documents, e.g., ‘deferred compensation agreement’?" The plaintiff maintained that the court intended for her to receive her entire 50 percent interest in Exusia tax free, notwithstanding that the dissolution judgment ordered that 40 percent of her interest would be paid to her by way of a deferred compensation agreement, which would result in the plaintiff bearing a tax burden.⁹ The plaintiff represented that her corporate counsel had drafted a redemption agreement pursuant to which the plaintiff would receive her entire 50 percent interest in Exusia tax free but that the defendant's corporate counsel refused to sign the agreement because it allegedly did not comport with the terms of the dissolution judgment. As relief, the plaintiff requested that the court (1) clarify the dissolution judgment with regard to the division of Exusia, and (2) order the defendant to execute the corporate documents prepared by her corporate counsel, which included the redemption agreement.

On January 28, 2019, the defendant, in a combined document, filed (1) a response to the plaintiff's January 15, 2019 motion and (2) a motion to clarify, requesting that the court "clarify its memorandum of decision ... to provide that the buyout payment due to the [plaintiff] be tax deductible to Exusia as deferred compensation." The defendant asserted that the court adopted the plaintiff's proposal that 40 percent of her interest in Exusia be remitted to her by way of a deferred compensation agreement, which would result in Exusia's payment thereof to the plaintiff being tax deductible to Exusia and taxable to the plaintiff. The defendant contended that the plaintiff was seeking to change the terms of the judgment of dissolution to shift the tax burden to the defendant, which would disturb the equal division of the parties’ property. As relief, the defendant requested that the court clarify that the payment of the plaintiff's 40 percent interest in Exusia under the deferred compensation agreement would be tax deductible to Exusia.¹⁰

On January 30, 2019, the plaintiff filed a reply brief. She contended that the court's orders regarding Exusia constituted property assignments that were intended to be tax free to her. She conceded that a deferred compensation agreement was not the proper mechanism to effectuate the buyout of her 40 percent interest in Exusia; however, she maintained that the court intended to award her entire 50 interest in Exusia to her tax free and that the court's reference to a deferred compensation agreement in the judgment of dissolution was not a substantive term thereof.

On January 31, 2019,...